Allied Digital's margin improves, but interest costs limit profit growth
Revenue growth outpaced expenses QoQ, but interest expense rose +22.54%; other income still contributed 12.35% of pre-tax profit.
Filed 03 Nov 2026, 17:57 IST · after market close · Allied Digital Services Ltd (ADSL)
Key takeaways
- Consolidated revenue rose +1.85% QoQ while expenses increased +1.34%, lifting operating margin by 0.46 percentage points to 9.19%.
- Net profit grew only +1.61% QoQ as interest expense increased +22.54%, despite the tax rate declining by 0.23 percentage points.
- Allied Digital's 9.19% operating margin was 10.08 percentage points below the 19.27% median for 51 reported IT peers.
Price around the results
Revenue growth was modest, with costs growing more slowly
Consolidated revenue increased +1.85% QoQ to Rs 265.32 cr, while expenses grew +1.34% to Rs 240.93 cr. That spread lifted operating profit by +7.26% and expanded operating margin by 0.46 percentage points to 9.19%. Management said the quarter reflected continued execution across customer engagements.
Higher interest expense diluted the operating improvement
Interest expense rose +22.54% QoQ, which limited pre-tax profit growth to +1.30% even as operating profit increased +7.26%. The lower tax rate, down 0.23 percentage points to 26.33%, helped net profit rise +1.61%. Other income represented 12.35% of pre-tax profit, making reported earnings partly dependent on non-operating income.
Margin remains well below the reported IT peer median
Allied Digital's 9.19% operating margin was 10.08 percentage points below the 19.27% median among 51 IT peers that had reported the quarter, placing it sixth from the bottom. Sequentially, margin improved from 8.73%, but the available trend covers only the immediately preceding quarter and does not establish a longer multi-quarter direction.
Management is focusing on larger engagements and AI-led delivery
Management said it aims to pursue larger, more complex and multi-year engagements, while the company told investors it is accelerating AI adoption across service delivery. The presentation also says the AIMS roadmap targets more than 70% automation and that an Agentic AI managed-services pilot for an insurer is being scaled. Management noted that the global operating environment remains selective, with longer decision cycles for new technology investments.
Results were filed after market close
The consolidated results were filed after market close, so there is no reported market reaction to assess yet. The quarter's operating improvement therefore needs to be weighed against the 22.54% rise in interest expense and the 12.35% contribution of other income to pre-tax profit.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ |
|---|---|---|---|
| Revenue | ₹265 cr | ₹260 cr | +1.85% |
| Other income | ₹2 cr | ₹3 cr | -19.16% |
| Expenses | ₹241 cr | ₹238 cr | +1.34% |
| Operating profit | ₹24 cr | ₹23 cr | +7.26% |
| Operating margin (%) | 9.19% | 8.73% | — |
| Interest | ₹4 cr | ₹3 cr | +22.54% |
| Depreciation | ₹5 cr | ₹5 cr | +2.99% |
| Profit before tax | ₹17 cr | ₹17 cr | +1.30% |
| Tax | ₹5 cr | ₹4 cr | +0.45% |
| Net profit | ₹13 cr | ₹12 cr | +1.61% |
| EPS (₹) | ₹2.22 | ₹2.19 | +1.37% |
Operating margin of 9.19% compares with a Information Technology sector median of 19.27% across 51 peers that have reported Q2FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- The company said its quarterly performance reflected continued execution across customer engagements.
Guidance & outlook
- The company states a mission of 10x growth.
- The company aims to pursue larger, more complex and multi-year engagements.
- The company plans to accelerate AI adoption across its service delivery model.
- The AIMS roadmap targets more than 70% automation.
New initiatives
- The company is scaling an Agentic AI managed-services pilot for an insurer.
Problems & risks
- The global operating environment is selective, with longer decision cycles for new technology investments.
What to watch
- Whether operating margin holds above 9.19% after rising 0.46 percentage points QoQ.
- Whether interest expense moderates from the +22.54% QoQ increase.
- Progress on the AIMS roadmap's more than 70% automation target and the Agentic AI managed-services pilot.